Michael Burry-Linked Stocks Take a Beating as Build-A-Bear and PayPal Slide While Nvidia Surges
The stock market was much more stark for some of the companies associated with investor Michael Burry, with Build-A-Bear Workshop (BBW) plunging sharply and PayPal (PYPL) falling sharply in after-hours trading. Nvidia (NVDA) also was a big winner given the relatively different fortunes of individual stocks in an increasingly volatile market.
Build-A-Bear’s shares fell by about 27% or more.
The decline is all the more significant because Build-A-Bear has attracted attention from Burry, one of the most successful investors in the stock market and best known for betting against the US housing market before the 2008 financial crisis. Burry always gets a lot of attention from retail investors and Wall Street analysts because he is so contrarian in his investing and he so far has been willing to take risks which are very much in opposition to what the market is telling him.
The sharp decline in BBW shows the dangers of investing in a given business when the prospects of future growth are high. A bad future or loss of a huge business relationship can immediately change investor sentiment and drive aggressive selling.
PayPal was another big source of volatility. The payments company had rallied in the quarter amid speculation it could become the target of a major acquisition. Stripe and Advent International were discussing a deal that would have been worth more than $50 billion, the company said.
PayPal shares had climbed more than 40 percent in the third quarter as investors braced for a takeover and also had a better second quarter performance. But news that Stripe-Advent had dropped out of the race caused PayPal to tank in after-hours trading.
The drop illustrates how much takeover expectations affect stock pricing. Investors may price a potential acquisition into a company's shares once they do and if they do not, the shares will sell off quickly.
Even though Burry-linked stocks fell off a little bit, Nvidia shares were up about 9 percent. Nvidia is one of the main players in the world’s artificial intelligence revolution and investors are betting on demand for its graphics processing units and data centers.
It is the disparity in performance that really allows us to see the market in different sectors. Companies with company-specific problems or a loss of takeover speculation are on the one side, while Nvidia is still benefiting from interest in artificial intelligence infrastructure and demand for computing power.
And the moves also show investors that following a top investor's portfolio does not guarantee similar performance across all holdings. Even if stocks are linked to the same investor, the price of a stock can be based on completely different factors: earnings, guidance, acquisitions, industry trends, and market sentiment.
For Burry fans, the recent developments are particularly interesting because he has a reputation for taking contrarian positions at times. Build-A-Bear’s dramatic decline and PayPal’s weak post-takeover speculation may strengthen the risks associated with individual stock selection while Nvidia’s rally shows the continued strength of the AI trade.
The divergent outlook of BBW, PYPL and NVDA shows us how rapidly market narratives can shift. Build-A-Bear investors are now focused on the company’s growth outlook, PayPal shareholders are reassessing the stock without the immediate prospect of a major takeover, and Nvidia continues to ride strong demand for artificial intelligence technology.
The result is a striking market snapshot: Burry-linked stocks are under pressure while Nvidia continues to surge; Wall Street rarely moves in a single direction and company-specific developments can overwhelm broader market trends.
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